A tense start to the new velvet season, the NZ Korean FTA is ratified by both governments and promotional work continues in South Korea.
This velvet season’s market started off slightly more tense than initially expected. Despite positive indicators in NZ key velvet market of South Korea, some of the prominent Chinese traders reportedly held off buying in an effort to drive prices down. This in turn caused a hesitation by some Korean buyers who needed to see where the market for velvet settled. This year in particular, Chinese traders claimed more excuses as to why prices would be back for NZ velvet. However, by looking at what is happening in the market, the following are clear facts:
- China’s government crackdown on excessive gift-giving behaviour by government officials has had an effect on velvet destined for this category. This will affect highly valued Regrowth and Spiker grades as well as the “jelly tip” (the very top of velvet) - which could have some trickle-down effect on main beam prices.
- Various reports from China and South Korea support the continued growing of “every day” consumption of velvet. This should support continued stable prices for Korean Grade velvet.
- Velvet prices remained firm for competing countries velvet this year.
- Market access into Korea is improving with the FTA and potential (at time of writing) removal of the special excise tax. These actions will have a positive effect on velvet over the medium term.
- The Kiwi dollar is weaker (by around 15%) compared to the same time last year.
It appears from early reports that these above factors are helping to keep prices around the levels achieved last year when prices rose by around 20%.
DINZ undertook several marketing activities with Korean companies as the season started, notably, through a joint promotion with Korean Ginseng Corp (KGC) to celebrate the success of their new Cheongnuksam product. The timing of the promotion was focussed on Chuseok (Korean Thanksgiving), the most significant gift-giving period in South Korea. Cheongnuksam is the most recent product KGC has launched (in January 2016), taking their total to 19 products that contains NZ velvet, and it is on track to become the company’s fastest growing product. DINZ teamed up with KGC’s velvet supplier, Provelco Cooperative Ltd, to show the top 15 KGC sales people where the velvet ingredient for this successful product is raised.
DINZ has also assisted PGG Wrightson with one of their innovative Korean customers keen to do a promotional video that will profile NZ velvet over velvet produced in other countries. Other general in-market activity continues in the lead up to the key consumption period.
DINZ’s Country of Origin Programme proof of concept introduced last year gained significant interest by Korean Oriental medicine doctors and marketers keen to differentiate premium NZ velvet. DINZ has approved a couple of new velvet marketers in the traditional channel and is trialling the concept by working with a couple of keen significant food companies. One major component of the Country of Origin Programme is DINZ’s requirement for line of sight of documentation that proves direct and transparent trade between NZ and Korea. NZ velvet sold to China for processing and then re-exported to Korea is not currently eligible to be part of the programme.